Correlation Between Commonwealth Bank and Stelar Metals
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Stelar Metals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Commonwealth Bank and Stelar Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Stelar Metals, you can compare the effects of market volatilities on Commonwealth Bank and Stelar Metals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Commonwealth Bank with a short position of Stelar Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Stelar Metals.
Diversification Opportunities for Commonwealth Bank and Stelar Metals
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commonwealth and Stelar is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Stelar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelar Metals and Commonwealth Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Commonwealth Bank are associated (or correlated) with Stelar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelar Metals has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Stelar Metals go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Stelar Metals
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.25 times more return on investment than Stelar Metals. However, Commonwealth Bank is 4.08 times less risky than Stelar Metals. It trades about 0.22 of its potential returns per unit of risk. Stelar Metals is currently generating about 0.02 per unit of risk. If you would invest 11,588 in Commonwealth Bank on August 28, 2024 and sell it today you would earn a total of 4,426 from holding Commonwealth Bank or generate 38.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Stelar Metals
Performance |
| Timeline |
| Commonwealth Bank |
| Stelar Metals |
Commonwealth Bank and Stelar Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Stelar Metals
The main advantage of trading using opposite Commonwealth Bank and Stelar Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Stelar Metals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Stelar Metals will offset losses from the drop in Stelar Metals' long position.| Commonwealth Bank vs. National Australia Bank | Commonwealth Bank vs. National Australia Bank | Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. National Australia Bank |
| Stelar Metals vs. Northern Star Resources | Stelar Metals vs. Evolution Mining | Stelar Metals vs. Bluescope Steel | Stelar Metals vs. Sandfire Resources NL |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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